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Tuesday, January 31, 2012

New Fiscal Bureau Figures Provide Mixed News on Medicaid Budget

A new memo from the Legislative Fiscal Bureau (LFB) provides a detailed analysis of the status of Wisconsin’s Medicaid budget. A careful review of the memo reveals that the various cost-saving measures proposed by DHS far surpass the estimated budget gap if they are all approved and yield the savings DHS has projected. However, some of the proposed changes to BadgerCare might not be approved by federal officials, and some of the other Medicaid changes could fall short of the department’s projected cost savings.

On balance, I’d say the memo is mostly good news – when considered relative to the $220 million deficit that DHS estimated a few months ago (when the department argued that deep cuts needed to be made in BadgerCare). The new LFB numbers show that the Medicaid budget could potentially be balanced without making any of the $93 million GPR of pending changes to BadgerCare (beyond the $23 million of cuts that got preliminary approval from federal officials in early December). However, that scenario assumes that: a) the cost of removing the Family Care cap can be fully offset by cost-efficiencies in long-term care, and b) DHS can achieve the $75 million GPR in other Medicaid cuts that the department proposed in late September (see Attachment 1 of the new memo).
This afternoon’s Journal Sentinel article about the new estimates begins with the premise that the size of the Medicaid deficit is now $141 million, before taking potential savings into account, and that figure is consistent with the LFB analysis. However, to arrive at that starting point, you have to account for the full cost of lifting the Family Care cap prior to accounting for any of the proposed cost-savings in long-term care.

The LFB memo lays out some concerns about whether all of the long-term care savings are realistic, but it certainly appears that there’s potential for achieving some significant cost savings there. Also, the memo doesn’t seem to take into account one other area of significant cost-savings for DHS – the federal performance bonus funding the state received for the success of BadgerCare in increasing enrollment of low-income kids. In late December the state received a performance bonus that reduces BadgerCare spending by $24.5 million GPR in the current fiscal year, and if the state doesn’t significantly change BadgerCare participation by children, we can count on getting a similar amount in the second year of the current biennium.

I think we can realistically expect a biennial total of at least $45 million GPR from the bonus awards. The Dept. of Administration has proposed lapsing $18 million from those savings to the General Fund, but that hasn’t been approved yet by the Joint Finance Committee (JFC). If the next state revenue and spending figures yield an improvement in the General Fund balance, the JFC should reject the proposed lapse and instead should protect BadgerCare and Family Care by setting aside all of the bonus funding received or anticipated in this biennium in a reserve fund, which could be tapped to offset any shortfalls in the $147 million of estimated Medicaid and long-term care efficiencies.